Question

Which of the following alternative loan structures generally makes it easier to meet the debt service coverage ratio (check all that apply)?

Participation Loan

Mezzanine Loans

Accrual Loans

Interest Only Loans

Convertible Mortgage

Answer 1

Ans: B) Mezzanine Loans Explanation: Mezzanine Loans structures generally makes it easier to meet the debt service coverage r atio The Debt Service Coverage Ratio (DSCR) measures the ability of a company to use it s operating income to repay all its debt obligations, including repayment of principal and interest on both short term and long term debt. A DSCR that's greater than 1 indicates that the business has enough income to comfortably cover loan principal and interest pa yments Participation loans are loans made by multiple lender to a single borrower A Mezzanine loan is a form of financing that blends debt and equity. This type of financing is similar to debt capital, that provides the lending party the right to adjust terms to access ownership or equity interest in the company if the loan is not paid back fully and on a timely basis. These types of loans are made availa ble in short periods of time and usually only require minimal collateral from the borrower An Accrual loan is the most common type of loan. This loan accrues interest on the outstanding balance throughout the life of the loan. An Interest only loan is a loan in which the borrower pays only the interest for some or all of the term, with the principal balance unchanged during the interest -only period. Convertible Mortgage is an adjustable- rate home loan which the borrower has the option at specified times of changing into a fixed-rate loan